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Andrew Davidson 
Susan Menke 
Susan Wolfe 
Lisa Hronek Archive for 2010
Can online behavior predict longevity?
Companies are thirsty for data on consumers and their behavior – this is nothing new. What is new is that companies now have access to tons of data on consumers, including online shopping behavior, information on social-networking sites, subscriptions and catalog purchases.
A few weeks ago, I came across an article in the Wall Street Journal that takes social networking and other online consumer data to a whole new level. I think it sounds too invasive.
Historically, this data has been used primarily for advertising purposes. As a marketing professional, I can accept that. The more data you have on a person, the more targeted your marketing promotions can be. Great! I will get relevant banner ads while I am searching the web.
Life insurers, however, are testing a new way to use this data. They’re testing models based on online behaviors to predict a person’s longevity and risk to be used for underwriting purposes, potentially eliminating expensive medical exam requirements.
One of the biggest tests is being conducted by the US arm of British insurer Aviva. It is building a predictive model based on online consumer-marketing data from 60,000 recent insurance applicants to see how well it can mirror more expensive health tests. Models predict that many diseases relate to lifestyle factors, which can be partly derived from customer online behavior. In the article, an example was used that said online and offline purchases can help categorize people as runners, dieters or coach potatoes.
While the thought of this makes me slightly uncomfortable, those in favor of these tests argue that using this information will lower insurance costs, increase efficiency and make life insurance purchases more customer-friendly. Furthermore, they stress that these models won’t be used to make final decisions; instead, they are intended to make the process more efficient for good-risk prospects.
Taking the consumer privacy and potential regulatory issues out of the equation (I feel like there are going to be A LOT of those), I’m asking myself what this data is actually telling companies. Honestly, I am always on diet social-networking sites, looking for low calorie recipes, subscribing to diet-related newsletters, but the pound of pasta I just ate clearly tells me that I’m not on a diet. I just like the idea of being on a diet. What would my online activity say about me? Would it accurately predict my longevity? Would it inaccurately segment me into a “dieter” segment?
I’m guessing many consumers don’t realize that every click of the mouse is being tracked and used for marketing purposes. I definitely don’t think most consumers realize their online activities could be used to predict their potential risk for life insurance products.
As online consumer data continues to grow in popularity and consumers continue to share more and more about themselves on the web, companies are going to find new ways to use this data. Regardless of the controversial aspects of these tests, it will be interesting to see how they all turn out.
Old-fashioned values: customer service in today’s day and age
I recently bought a wallet for my mother. It’s a nice wallet from an upscale store. I expect it to last FOREVER.
But the quality isn’t the point. The sales woman sent me a THANK YOU note!!! Hand-written no less. I was astounded.
Of course the thank you note made me think about banking. Because, truth be told, what doesn’t make me think about banking?
At the risk of sounding old fashioned…I believe in customer service. Really good customer service. Sometimes I think it’s a thing of the past.
But then I’m surprised. As I was with the thank you note. Some other examples…
I recently went to a favorite restaurant – one that I go to about every six weeks with the same three good friends. We had a horrible experience. I’m not much for writing letters, but this time I did. I felt it was important that management realize the issues. I love the restaurant – I didn’t want them to suffer and go out of business. (That was the fate of the past two restaurants in the same spot.) The manager responded with a profuse apology, admitted fault, and gave me a $50 gift card. I’ll keep going back, but honestly, just the apology would have sufficed. Aside from thank you notes and customer service, the issue here was Accountability. The restaurant took full ownership.
At the end of Summer 2009, I bought a pair of sandals for my daughter from a nice department store. Since it was the end of the summer, she didn’t wear them that much. This spring she put them on and the strap broke. I brought them back to the store and asked if there was anything they could do. I was honest and told them I bought them last year, but I still didn’t expect them to break. I was told that they couldn’t replace them because they were from last summer, but they could fix them. I was happy and bought more shoes.
There are many other things that I love about this nice department store. They can look up my past purchases. In fact, they looked up a purchase over a year old because we had some sizing confusion. If they don’t have something in the store they will ship it to you free of charge. If you are in one department and need something in another department they will happily run and get it for you. There are more things I like about it, but you get the point.
And then sometimes I’m really disappointed at how I get treated as a “valued” customer…
That same summer I also bought flip flops for myself. From a discount store we all know and love. The flip flops had cute little flowers on them. They fell off in a week. I tried to exchange them because I felt they were defective. I was told “we don’t exchange worn shoes.”
Of course they were worn!!! But they were also defective. I left grumpy, and I felt like they took advantage of me. When I feel like I’ve been mistreated, I typically boycott. My husband is big on boycotts. We have a lifelong boycott of one beer company, one department store and one car manufacturer, all of which shall remain nameless. Unfortunately, with three kids it’s impossible to boycott this particular store.
Stellar customer service – along with thank you notes and accountability – seems to be a thing of the past. I’m convinced that the mantra “the customer is always right” doesn’t even get taught in employee training sessions anymore. Most stores now require customers to make returns within a certain time frame. And if you don’t have the receipt? Don’t even try. Even returning defective merchandise can be a surprising and exasperating challenge.
When was the last time you stopped to write your customer a thank you note? Have you ever told a customer that you can’t look at their account activity more than four months in the past? How is it that department stores can look at my entire lifelong purchase history, but a bank can’t look at my transactions prior to 120 days? Something to think about.
Personally, I’m off to write some thank you notes…
Behavioral tracking and privacy
Behavioral tracking is in vogue
Over the last couple of years, behavioral tracking has become an extremely important means for determining how to target advertising online. Instantaneous auctions can now be held to buy online ad space based on the clickstream data produced by specific consumers.
If a consumer has just visited the Neiman Marcus website, for instance, chances are that a banner ad for Neiman Marcus will appear as that consumer continues to view other web pages. Capital One tailors the content of the homepage on their website to the behavioral data they have about the current viewer. Companies are also taking this one step further and offering incentives such as rewards points or discounts to consumers who provide information about themselves so that the ads they see can be targeted even more specifically to their preferences.
Social media is definitely testing a number of ways that they can get in on the act (or even lead the way). For instance, a company called SocialTwist provides a small widget to websites that allows viewers of that site to forward a marketing message with one click to friends that might be interested. The advertising includes Facebook, Twitter and tabs from other social media sites, and has a pass along rate higher than any other type of service (according to the company).
One challenge to behavioral targeting is figuring out who are the truly interested users. And then crafting a marketing message that will appeal to them. Then a decision needs to be made – is the advertising trying to simply sell something right away or is for branding purposes and for building a longer term relationship?
Obviously this is a very new process and the potential exists for companies to take this type of advertising in a lot of different directions.
…but companies need to be extremely cautious about privacy concerns
At this point (as of late 2010) the data is primarily used for targeting ads to the assumed preferences of specific consumers. But as consumers become more and more aware that their online behavior is being tracked, there may be a backlash that could cause significant damage to the brands of financial services companies. Along with the damage that has already been done to consumer perceptions of the industry in the aftermath of the financial and banking crisis of late 2008, concerns about violation of consumer rights to privacy could very well be a “BP oil spill” for specific companies or the industry as a whole.
According to an article in the Wall Street Journal (“New Ways Bankers Are Spying on You”, November 6, 2010), banks have also begun using transactional data (such as the Fair Isaac bank-depositor behavior scores which go beyond the traditional FICO scores) as leading indicators as to when customers may be getting into trouble. This impacts how banks will interact with existing customers, as well as how they will decide to solicit new relationships. Combine this with increasing online behavior targeting activity, and we have the potential for a huge consumer backlash.
The reason is that American consumers are extremely protective of their personal information According to Mintel’s consumer research, more than 90% of Americans think privacy is a fundamental human right. In addition, 64% state that they would switch to a competitor if they found out that their personal information was being used without their permission. Another 24% don’t know what they would do, indicating that a full 88% of customers are at risk if companies were exposed as violating consumers right to privacy.
The opportunity? Transparency is key
In the aftermath of the credit crisis and bank failures over the last several years, financial companies need to be extremely cautious about adding to the concerns that consumers have about trusting financial brands. Add to that the more sophisticated transactional and credit modelling techniques that are increasingly being used, and the addition of behavioral tracking (even if only for marketing purposes) could be a tipping point.
Consumers are ambivalent about behavioral targeting (about half say they wouldn’t mind having ads targeted to their personal preferences). This type of advertising could work if financial companies wade carefully and are completely transparent about their intentions. The key is allowing the consumer to have control, or at least the perception that they are in control.
Banks do not need to fear transparency. Transparency can actually be a selling point, and is already being used effectively by a number financial services companies. If applied in the context of the total online experience for the consumer, i.e. allowing the consumer more control over their own experience, then targeted online marketing can be a quite effective way to help rebuild trust with the customer.
Cutting Edge Credit: push a button to pay with rewards
I think it’s safe to say that everyone is well aware of how competitive the credit card industry is. Consumers are always on the lookout for a good rate and lucrative rewards.
With reward programs present on four out of every five new credit card offers in Q3 2010, credit issuers are well aware that rewards, especially good rewards, can be key to obtaining the most attractive (read high spend/high usage) customers.
But it’s not just the rewards program that keeps customers – it’s a matter of getting those desirable customers to redeem the rewards. And it’s not who has the best rewards either. Readers: reward programs, no matter what the earn rate or the redemption choices, will fail if customers don’t actually use or redeem the rewards.
Credit issuers are trying all sorts of tactics to motivate lazy reward earners (I, myself, am one of this group). I receive notices via email and direct mail on a fairly regular basis reminding me, telling me, cajoling me and sometimes begging or ordering me to use my rewards.
And yet, I am unmoved. Why? That’s probably best saved for another entry. Today, I’d like to share something I stumbled across that may convert the most stubborn non-adherents into the fold of the redeemer.
Readers, I’d like you to think back to every direct mail or email communication you’ve ever received that dealt with redeeming your rewards. Did you respond? Did you go online or call and wait on hold? Did you ever wonder “why can’t someone just make this EASY?” Well, someone making it easier may be closer than you think.
Citibank is testing 2G cards. This card lets you pick at the point of sale if you want to pay with rewards or with your balance, all at the push of a button on the card itself. (Buttons! Personally, I LOVE pushing buttons.) Right then, right there. No signing in to an online account that I can never remember the password to. No calling a number and being placed on hold. Just push a button and presto, you have redeemed.
I just have two questions to ask: one, what took issuers so long? And two, mine’s in the mail, right?
Read about this on Mashable: http://mashable.com/2010/10/23/citibank-first-to-test-revolutionary-credit-card-system-card-2-0/
Check it out on YouTube: http://www.youtube.com/watch?v=0RPkODrcjkU
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